Posted at 10:30 AM (CST) by & filed under In The News.

Wall Street Economics

Young Chuck moved to Texas and bought a donkey from a farmer for $100.
The farmer agreed to deliver the donkey the next day.
The next day the farmer drove up and said, ‘Sorry Chuck, but I have some bad news, the donkey died.’
Chuck replied, ‘Well, then just give me my money back.’
The farmer said, ‘Can’t do that. I went and spent it already.’
Chuck  said, ‘OK, then, just bring me the dead donkey.’
The farmer asked, ‘What ya gonna do with a dead donkey?
Chuck said, ‘I’m going to raffle him off.’
The farmer said ‘You can’t raffle off a dead donkey!’
Chuck said, ‘Sure I can. Watch me. I just won’t tell anybody he’s dead.’
A month later, the farmer met up with Chuck and asked, ‘What happened with that dead donkey?’
Chuck said, ‘I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.’
The farmer said, ‘Didn’t anyone complain?’
Chuck said, ‘Just the guy who won. So I gave him his two dollars back.’
Chuck now works for Morgan Stanley in their OTC Default Derivative Department.

Jim Sinclair’s Commentary

$42 billion in the hole according to recent reports and now a drought.

Do you think Mother Nature might be unhappy with how things are being run?

California declares drought emergency
By Peter Henderson

SAN FRANCISCO (Reuters) – California Governor Arnold Schwarzenegger on Friday declared a state emergency due to drought and said he would consider mandatory water rationing in the face of nearly $3 billion in economic losses from below-normal rainfall this year.

As many as 95,000 agricultural jobs will be lost, communities will be devastated and some growers in the most economically productive farm state simply are not able to plant, state officials said, calling the current drought the most expensive ever.

Schwarzenegger, eager to build controversial dams as well as more widely backed water recycling programs, called on cities to cut back water use or face the first ever mandatory state restrictions as soon as the end of the month.

"California faces its third consecutive year of drought and we must prepare for the worst — a fourth, fifth or even sixth year of drought," Schwarzenegger said in a statement, adding that recent storms were not enough to save the state.


Jim Sinclair’s Commentary

That is not FAIR

Senate bars FCC from revisiting Fairness Doctrine
By JIM ABRAMS – 1 day ago

WASHINGTON (AP) — The Senate has barred federal regulators from reviving a policy, abandoned two decades ago, that required balanced coverage of issues on public airwaves.

The Senate vote on the so-called Fairness Doctrine was in part a response to conservative radio talk show hosts who feared that Democrats would try to revive the policy to ensure liberal opinions got equal time.

The Federal Communications Commission implemented the doctrine in 1949, but stopped enforcing it in 1987 after deciding new sources of information and programming made it unnecessary.

President Barack Obama says he has no intention of reimposing the doctrine, but Republicans, led by Sen. Jim DeMint, R-S.C., say they still need a guarantee the government would not establish new quotas or guidelines on programming.


Jim Sinclair’s Commentary

The following quote from this article on Pakistan sums up the situation: "Their country is in mortal danger." If Pakistan is in mortal danger then so is the entire Middle East. If the Middle East is in mortal danger then so is the West.

Playing With Fire in Pakistan
Published: February 27, 2009

Almost no one wants to say it out loud. But between the threats from extremists, an unraveling economy, battling civilian leaders and tensions with its nuclear rival India, Pakistan is edging ever closer to the abyss.

In a report this week, The Atlantic Council warned that Pakistan’s stability is imperiled and that the time to change course is fast running out. That would be quite enough for any government to deal with. Then on Wednesday, Pakistan’s Supreme Court added new fuel upholding a ruling barring opposition leader Nawaz Sharif — a former prime minister — and his brother from holding elected office. That touched off protests across Punjab Province, the Sharifs’ power base and Pakistan’s richest and politically most important province.

The Sharifs charge that the Supreme Court is a tool of President Asif Ali Zardari. They are backing anti-government lawyers who have long campaigned for the reinstatement of the country’s former top judge who was dismissed by former Gen. Pervez Musharraf in 2007.

We don’t know if Mr. Zardari orchestrated this ruling, as Nawaz Sharif and many others have charged. (The government actually argued Mr. Sharif’s side in the case, which stems from an earlier politically motivated criminal conviction.) We do know the danger of letting this situation get out of control.

When Mr. Zardari became president, he pledged to unite the country. He has not. Like Mr. Zardari, Mr. Sharif is a flawed leader and no doubt is manipulating the combustible court ruling for personal political gain.


Jim Sinclair’s Commentary

Once you open this Pandora’s Box of Bailouts you cannot close it.

Protect yourself with gold! The US dollar is not strong. The non-euro, European currency units are being raided. The default derivative index is being used by Vlad the Impaler against the countries represented by the currency units being raided by the Vlads.

Citigroup’s Third U.S. Rescue May Not Be Its Last, Analysts Say
By Christine Harper

Feb. 28 (Bloomberg) — The U.S. government’s third attempt to help rescue Citigroup Inc. won’t stanch the company’s losses, which will continue to swell and may lead the bank to require more money in coming months, analysts said.

Yesterday’s action didn’t furnish the New York-based bank with new money, although it cuts expenses by eliminating dividends on preferred stock. Instead, it converted preferred shares into common equity, which absorbs the first hit in the event of further losses, at an above-market-value price of $3.25. The stock, which has fallen 78 percent since the beginning of the year, closed in New York trading yesterday at $1.50, its lowest since November 1990.

Vikram Pandit, 52, Citigroup’s chief executive officer, told investors yesterday that increasing tangible common equity to as much as $81 billion from $29.7 billion should “take the confidence issues off the table,” regarding the company’s ability to absorb losses. Still, Citigroup, which lost $27.7 billion in 2008, is expected to lose $1.24 billion in the first six months of 2009, according to the average of analysts’ estimates compiled by Bloomberg.

“There’s no difference here,” said Christopher Whalen, co- founder of Institutional Risk Analytics, a Torrance, California- based risk-advisory firm. “It won’t fix revenue, and you’re still going to see loss rates.”


Jim Sinclair’s Commentary

The worse it gets the more they will spend, ad infinitum.

Protect yourself with gold. There is nothing else.

Sharper Downturn Clouds Obama Spending Plans
Published: February 27, 2009

The economy is spiraling down at an accelerating pace, threatening to undermine the Obama administration’s spending plans, which anticipate vigorous rates of growth in years to come.

A sense of disconnect between the projections by the White House and the grim realities of everyday American life was enhanced on Friday, as the Commerce Department gave a harsher assessment for the last three months of 2008. In place of an initial estimate that the economy contracted at an annualized rate of 3.8 percent — already abysmal — the government said that the pace of decline was actually 6.2 percent, making it the worst quarter since 1982.

The fortunes of the American economy have grown so alarming and the pace of the decline so swift that economists are now straining to describe where events are headed, dusting off a word that has not been invoked since the 1940s: depression.

Economists are not making comparisons with the Great Depression of the 1930s, when the unemployment rate reached 25 percent. Current conditions are not even as poor as during the twin recessions of the 1980s, when unemployment exceeded 10 percent, though many experts assert this downturn is on track to be significantly worse.


Jim Sinclair’s Commentary

I heard he was just trying to make a withdrawal from his own account as the FDIC took over.

Church deacon, soccer coach, suspected bank robber
February 27th, 2009
By Steve Brusk

(CNN) — Bruce Windsor is known as many things: church deacon, soccer coach, father of four. But facing potential financial problems, he’s now known as something else: suspected bank robber.

Police say the 43-year-old owner of a real estate company walked into the Carolina First Bank in Greenville, South Carolina, late Thursday with a mask and a handgun.

In court documents filed Friday, police said he forced two bank employees into an office at gunpoint and demanded money. Police arrived minutes later with the suspect still inside, touching off a tense 90-minute standoff before he released the hostages and surrendered.


Posted at 10:00 AM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

Here are some of the 450+ great people that made it to the CIGA meeting in Toronto last week.

Thank you all for the warm welcome you showed me. If you have any more pictures, I would love to see them.



Dear Jim,

You wrote:
“As long as we do not see a reinstatement of the "Uptick" rule and regulatory demand that this rule be attended to, as well as arrests for naked shorting, the inviting conclusion is that the activities of the 666 beasts are acting at the behest of ruling government, mopping up all the money on the planet still available.”

I spent the last week calling my Congressman and trying to get an answer on the progress of bill H.R. 302 – the restoration of the uptick rule. I also made calls to Congressman Gary Ackerman’s office (the bill’s author), and also to the House Financial Services committee (chaired by that genius, Barney Frank), the committee the bill is referred to. The experience was akin to talking to brain dead aliens. NO ONE in government knows:

1) The status of the bill
2) The implications of the passing of such a bill
3) The implications of NOT passing such a bill

If you ever want to feel the sensation of taxation without representation, make an attempt to contact your congressman’s office. I would suggest polishing off 2 or 3 of your favorite cocktails before attempting such a futile act, though. In the future, I plan to have a bottle of 7 star Metaxa by my side.

Do you think I would ever buy a non-gold or silver related asset after talking to them?  Quite the contrary – why should I participate in the stock market when our so called ‘leaders’ won’t make even the tiniest attempt to defend the sanctity of it? The Dow can go to zero for all I care – aside from gold, silver and precious metal mining shares, I won’t be participating in any of it.

CIGA Anthony

P.S. Here is the progress of the bill, which was introduced on Jan. 8th.  As you can see, this is not going to be happening any time soon.

Posted at 12:41 AM (CST) by & filed under General Editorial.

Dear CIGAs,

As a pilot myself, I do not like flying connector airlines. Generally they use low hour pilots that look to me as if they might just be out of grade school.

The recent and terrible accident in Buffalo, NY, wherein the commuter aircraft did a total pratfall (belly first, straight down) means their ship stalled in the air. Stalled is when a plane stops flying and just drops like a rock.

The conditions were known to be icy. Having flown in such conditions, I know what the powerful light is used for that illuminated the engines and wings. That is so you can inspect for ice and the operation of the ice boots.

Since it was a prop plane, ice from the blades should have been hitting the fuselage, sounding like incoming .50 cal rounds.

That accident is more than likely pilot error. No way am I going to fly Yippee Do Air operated by some major name. Ever wonder why they are separate corporations of the major?

Obama last night:

“All you have to fear is fear itself.” That sums up last night. Soon we will have fireside chats every week.

If nothing has scared you yet about the future, last night should have. All this massage of a public was useless then, as it will be now.

Nothing has changed. Trying to PR a change is like telling a TB victim they are just fine and sending them to the mall to infest hundreds.

Swiss account holders need not panic.

The Swiss are not about to rush to hand over names, addresses and social security numbers of account holders.

The process requires the IRS to present the Swiss authorities with proof of tax evasion after which the Swiss will allow the entity to defend itself of the charges in Switzerland.

Now this is legally somewhat of a cart before the horse. If you do not have the dealing information of an account but are simply requesting it you have no evidence to present. That is not a smoking gun of a crime.

This entire procedure moves so slow that it will be in the next ice age when the procedure culminate, if they ever do.

As far as embargos on UBS state side assets, the IRS can have them. They are primarily bankrupt toxic paper OTC derivatives.

Of all international banks, UBS distinguished itself as the major manufacturer and distributor of now totally defunct OTC derivatives, therefore what is there for them to lose except a few executives in the US doing time, and the rest non US executives not traveling to the US anytime in the next 100 years.

Posted at 5:44 PM (CST) by & filed under General Editorial.

My Dear Friends,

“Vlad III, Prince of Wallachia, more commonly known as Vlad the Impaler (Vlad Ţepeş in Romanian), also known as Vlad Dracula, or simply Dracula (1431 – December 1476), was a Wallachian (present-day southern Romania) voivode. His three reigns were in 1448, 1456–1462, and 1476. Vlad the Impaler is known for the exceedingly cruel punishments he imposed during his reign.[1] Impalement was Ţepeş’s preferred method of torture and execution.[2]

In the English-speaking world, Vlad III is perhaps most commonly known for inspiring the name of the vampire in Bram Stoker’s 1897 novel Dracula.[3]

As prince, Vlad maintained an independent policy in relation to the Ottoman Empire[4] and was a defender of Wallachia against Ottoman expansionism.”


These 666 beasts are running amuck in their present plans to break Europe after having been key players in the destruction of everything they touch in all world equity markets.

There will never be enough money for them as they are the most terrorized people on the planet needing all its wealth to feel secure. These criminals have killed and will be responsible for the deaths of more people than most wars.

The public is falling, even today, for the planted false flag PR that comes out at least five times a day concerning the disintegration of all of Europe, the false claim that Swiss secrecy is compromised and that the problems of the Euro exceed the problems of the USA by orders of magnitude. I imagine the public will always be the lemmings running back and forth as false information is fed to them to benefit the position of these global destroyers of life. These destroyers have no regrets whatsoever.

The only difference between these people and Vlad is the suits they wear. They are the worst of criminals and do not deserve their lifestyle. These people’s lives are a stain on humanity.

Where is the present day Huey Newton and his Panthers who organized to right wrongs.

As long as we do not see a reinstatement of the "Uptick" rule and regulatory demand that this rule be attended to, as well as arrests for naked shorting, the inviting conclusion is that the activities of the 666 beasts are acting at the behest of ruling government, mopping up all the money on the planet still available.

The US dollar is not strong. The dollar level is the mirror image of the war Vlad is carrying out against the Euro and European non-Euro currency units. Watch the momentum of the US dollar to indicate when Vlad runs into supply from those major central banks that wish to unload them and do not buy the massive false PR being spearheaded to assist these demons in their wish to destroy Europe.

My prayer is that these Vlads should all meet Jai Kali-ma.

Wake up! All this is a replay of the alleged Soros play against Asia in the 90s.

It is hard to be in more trouble than the USA and their trans-pond state, Great Britain as shown below.

Respectfully yours,

Global downturn: In graphics
This is one of the most tumultuous times on record in the global financial markets.

Huge amounts of money have been committed in financial support for banks.


Governments are spending billions of dollars to kick-start economic growth. Measures include tax cuts and building projects.



The financial landscape has changed dramatically, with several giants of the business world disappearing.



The UK has spent £81bn to prop up Royal Bank of Scotland, HBOS and Lloyds TSB as well as nationalised Northern Rock and parts of Bradford & Bingley.

The Treasury and the Bank of England have pledged hundreds of billions of pounds of further support for the fragile banking system.

A £250bn credit guarantee scheme announced in October is being expanded to encourage banks to lend more, with a commitment of up to £50bn.



Jim Sinclair’s Commentary

The following show’s Ron Paul’s view that “The Federal Reserve Is The Culprit.”


Jim Sinclair’s Commentary

This picture is being played and replayed everywhere. Yes, those elected to public position should be clean, but who can be in the present circumstances and which bill would you prefer to stiff?

19 Georgia lawmakers behind on taxes, state report says
Thursday, February 26, 2009

Nineteen members of the state Legislature have failed to pay state and federal income taxes, some of them dating back to 2002, according to a Georgia Department of Revenue report given recently to legislative leaders.

The report on the alleged tax dodgers, with names and Social Security numbers redacted, has been forwarded to Republican and Democratic leaders of the state House of Representatives and Senate.

“Leaders of both parties have made it clear this will not be tolerated,” state Rep. Joe Wilkinson (R-Sandy Springs), chairman of the House Ethics Committee, said in an interview late Thursday night.

Wilkinson said House and Senate leaders are now discussing what should happen to the 16 House members and 3 senators in wake of the disclosure.

Wilkinson said he requested the report from the Department of Revenue after another House member was found delinquent on his tax returns.



Jim Sinclair’s Commentary

In the ethics of today’s world, the politically connected can do no wrong no matter how heinous the wrongs they do are.

When is enough, enough?

I think that can defined as before January 14th, 2011.

Firms defraud government but get new US contracts
By LARRY MARGASAK, Associated Press Writer Larry Margasak,
Associated Press Writer – Fri Feb 27, 4:35 am ET

WASHINGTON – Companies that defrauded the United States and jeopardized American lives received new government work despite rulings designed to stop them from receiving federal contracts, government investigators report.

Payments went to a company whose president tried to sell nuclear bomb parts to North Korea, a company that jeopardized lives on the aircraft carrier USS John F. Kennedy, and a seller of body armor that the Air Force said was defective.

The companies were on a government database of 70,000 individuals and businesses suspended or barred by various U.S. agencies from receiving government contract work.

The Government Accountability Office blamed some of the mistakes on faulty computer searches by officials who left out commas or periods. But it also said the search engine for the database often failed to identify any of the entries on the exclusion list.

A hypothetical suspended company named XYZ Corp., Inc. — with a comma — would escape detection if one searched for XYZ Corp. Inc. — without the comma — the report said.


Jim Sinclair’s Commentary

For those of you who ask me if anything has changed, the following is a word from Shadow Statistics.

Budget Containment and a Normal 2010 Economy Are Nonsense 
– Economic Data Remain Consistent with 10%-Plus Hit to Business Activity 
– Upward Revision to GDP Inflation 
– Major Downward Revisions Likely to 2008 GDP 
– Intensifying Systemic Solvency Crisis


Jim Sinclair’s Commentary

And on and on it goes.

Fannie Mae seeks $15.2B in US aid after 4Q loss
Fannie Mae seeks $15.2 billion in government aid after posting $25.2 billion 4th-quarter loss
Alan Zibel, AP Real Estate Writer
Thursday February 26, 2009, 7:12 pm EST

WASHINGTON (AP) — Fannie Mae said Thursday it needs $15.2 billion in government aid — though that figure is expected to grow — because it lost nearly $59 billion last year as the foreclosure crisis mushroomed.

The Washington-based mortgage finance company hemorrhaged $25.2 billion, or $4.47 per share, in the fourth quarter. That compares with a loss of $3.6 billion, or $3.80 a share, in the year-ago period.

Fannie’s net worth — the value of its assets minus the value of its liabilities — fell below zero at the end of the quarter, forcing the company to request funding from the government for the first time.

The government seized control of Fannie Mae and its sibling Freddie Mac in September and last week doubled their lifelines to $200 billion each to guarantee they would never fail.

Treasury Secretary Timothy Geithner said the increase in cash is "not a judgment about the expected losses ahead. It’s just a way to make sure people understand that they will be able to play this role going forward."



Jim Sinclair’s Commentary

Pakistan today.

Pakistan defense minister’s vehicle attacked

ISLAMABAD, Feb. 27 (Xinhua) — Unknown people attacked the vehicle of Pakistan’s Defense Minister Ahmed Mukhtar on Friday, local media reported.

The vehicle was attacked in the garrison city of Rawalpindi near Islamabad, but heavy contingent of police succeeded in rescuing the minister, private Geo TV channel said.

It is not clear who attacked the minister’s vehicle, but it might be in connection with the protests triggered by the supreme court verdict banning former prime minister Nawaz Sharif and his brother from elected office.

Pakistan Supreme Court on Wednesday declared Nawaz Sharif, also chief of the opposition party Pakistan Muslim League-Nawaz (PML-N), and his brother Shahbaz Sharif ineligible for contesting elections for criminal convictions.

The verdict has caused countrywide protests from the PML-N workers and supports, who set fire on cars and blocked roads in different cities.


Posted at 3:46 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

News that the Feds were converting their preferred shares of Citi into common shares was enough to knock the snot out of that stock and that served to drag the financials down lower. Citi was whacked for 28% as I pen this. If you want to see a genuine horror story, pull up a 3 year price chart of Citi… the stock has gone from trading over $50 to less than $2.00. BOA was taken down 8%. There are increasing fears of bank nationalization by the feds and the continuous dribble and drabble of conflicting news coming out of this administration’s point men on this issue has unnerved would-be buyers of the banks.

Also, the GDP news was the worst since 1982! The economy shrank at an annualized rate of 6.2% in the 4th quarter of 2008. And remember folks, we are using government figures here – just use their figure as the high side and go down from there and you will get an accurate reading.

All that served to push equities lower which then pushed gold higher in the same pattern that we have been seeing for some time now. If you stick a 5 minute bar chart of gold alongside that of a 5 minute bar chart of the emini S&P, you will see the linkage between the two. I want to emphasize here particular to those who keep writing me telling me I am wrong about this, that I am not saying there is a tic by tick relationship between the two. I am saying that gold is generally moving inversely to the S&P. When it moves off its lows, selling is coming into gold. When it sinks down towards it lows, buying comes back into gold. Once again, RISK is what is being measured here or I should rather say, the willingness or unwillingness of investors to take it on.

Earlier in the session, the S&P broke down below its major support level at the November 2008 low but then popped briefly back above that level. It still managed to trade down to levels last seen in April 2007! It sure seems to me that the equity bulls are putting up one helluva valiant effort to defend that technical level. They know full well that if they fail to hold here, the stock market is going to move sharply lower as that is a sort of last-line-in-the-sand defense point from a technical perspective. Equity bulls are buying for two reasons – they are trying to force a TECHNICAL BOTTOM in the market and they are claiming that all of the bad news is already in the market. If only gold bulls had the same strength of conviction that the equity bulls display. Instead our side seems intent on delivering over their headquarters to the enemy wrapped with red bows and ribbons and “WELCOME” signs written all over it. Face it, these are the last guys you would want in a foxhole beside you in the event of a major battle. They would run up the white flag before you ever got your magazine loaded…I am not speaking of the smaller public – I am referring to the fund managers who still have it within their power to break the rein of the bullion banks over the Comex gold market but are too dense to do so. They insist on playing the paper game with these sharks.

Deliveries finished up for the expired February gold contract yesterday and moved into the thinly traded March. Total for February ended up as 5,920 or 592,000 ounces. Not all that impressive to be honest considering that in December deliveries totaled 1,357,900 ounces of gold. We will have to wait until the April contract goes into its delivery period at the end of March to see what kind of numbers can be put up. The thin March will be along the line of that which we saw in the January contract.

The big action today as far as yours truly was concerned was the action in the long bond. They cracked support moving sharply lower even as equities fell apart. I have mentioned on several occasions that it was out of the norm to see the bonds and equities moving in tandem since as a general rule they have been going in the opposite direction during this economic meltdown. Of late however, there have been days in which the bonds have fallen right alongside of the general equity market. It is almost as if the very notion of US Treasuries as a safe haven is being called into serious question by many bond traders. That fits with the manner in which the credit default insurance market is pricing coverage for some Treasuries. There still continues to be safe haven flows moving into bonds but those are being met with selling by those who are mortified by the gargantuan wall of supply that they see coming, thanks to a run amok, out of control spending spree by our illustrious political leaders. After all, if you were contemplating buying Treasuries, would you be happy with a yield of 3% for ten years when you knew that the world would be swimming in the things in a few short months and into the foreseeable future? It may be redundant but watching bonds falling apart is one of the most serious things I see occurring in these markets. The long term monthly chart looks more and more like a major top has been posted. It makes me wonder where the demand is going to be coming from to buy the huge supply coming especially seeing that many of the overseas Central Banks do not need as many of them since their exports to the US have been dropping steadily meaning that they need to sterilize a lot less money.

Crude oil was weaker today with natural gas hitting a new yearly low before rebounding. It would certainly not hurt the cause for gold to see the energy markets bottom out.

I will put up a monthly chart for gold later on today. Before this week began, gold was on target to have put in the highest monthly CLOSE ever, before the gold bulls managed to surrender.

Enjoy your weekend.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini


Posted at 3:39 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is the nature of all the beasts.

2 Money Managers Held in New Wall St. Fraud Case
February 26, 2009

For two decades, Paul Greenwood and Stephen Walsh looked like Wall Street wizards.

Their supposed investment prowess lured hundreds of millions of dollars from public pension funds and universities and earned the two lavish trappings of success: stately homes, a stake in the New York Islanders and, for Mr. Greenwood, a horse farm that once belonged to Paul Newman.

But on Wednesday morning, federal agents arrested the two money managers on accusations filed by the United States attorney for the Southern District of New York in what has become all too familiar on Wall Street: Their investment fund was in fact a $667 million fraud — a small-scale version of the $50 billion fraud that Bernard L. Madoff is suspected of orchestrating.

But unlike Mr. Madoff, who is accused of masterminding a global Ponzi scheme, Mr. Greenwood and Mr. Walsh simply stole their investors’ money, the authorities said. Their two firms, the WG Trading Company and Westridge Capital, misappropriated funds from a host of deep-pocketed investors, including state and city pension funds, Carnegie Mellon University and the University of Pittsburgh.

Theirs is the latest in a series of alleged Wall Street frauds that have come to light as the bear market has deepened, exposing wrongdoing that was hidden in good times, when so many were making money. Indeed, federal agents arrested two other money managers on Wednesday in separate fraud cases.

Mr. Greenwood and Mr. Walsh never developed the sort of wide following that Mr. Madoff had enjoyed. But their arrest is nonetheless a startling turn of events for the pair, who first rose to prominence on Wall Street in the 1980s. They had devised a computerized trading program called Shark, which enabled traders to spot investment opportunities in the stock, bond and futures markets.


Posted at 3:51 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Sometimes it is a worthy exercise to try to stand back a bit from the closeness of the one minute bar chart and reflect a bit and ponders the action of markets, which is of course another way of saying the thought patterns of investors whose actions then result in movements in price. When doing so, I am struck by how silly this must appear to a completely, unbiased, impartial, non-involved spectator (of which there may be none in this land). It can actually be a bit humorous.

Look at it this way – millions of investors all across the land are watching one of the most severe, if not the most severe financial crisis unfolding in their lifetime. They have seen age-old companies collapse literally overnight; other name-brand institutions swallowed up and merged into their former competitors, massive job layoffs, automaker executives bowing their knee to their kings in Washington begging for money, entire countries going bankrupt with others teetering on the brink; massive amounts of debt, the likes of which we have never ever before witnessed being piled up like leaves on an autumn day, major US states as well as many urban cities running out of cash with which to meet their obligations, foreclosures which show no sign of abating not to mention the increasing number of delinquencies, etc,. The list could go on and on, you all have seen and read enough about it to fill in the blanks if I left anything out.

Then we get the Chairman of the Federal Reserve sitting on a chair in front of the Congress boldly proclaiming that he sees an end to the recession late this year or early in 2010, PROVIDED that the stimulus package is effective, and SUDDENLY, INSTANTLY, WITHOUT HESITATION, investors all across the fruited plain,  realize how utterly and completely wrong their assessment of things has become. With that they rush wildly back into the stock market on the assurances of the same man who told us back in August of last year, that the fallout was contained and that the institution which he represents had all the tools that it needed to deal with such exigencies at their disposal. Have you ever seriously considered just how incredibly stupid this must look to an outside observer? There was no warning from this man or his fellow compatriots back in July of last year that we were on the verge of such an event – no keen insight into the tenuous nature of things – no trumpet sounded that might alerted investors to the huge imbalances that had formed and were about to come crashing down on the heads of the citizens. And yet, millions of otherwise rational human beings are ready to expect that the worst is behind us and that recovery lies just a few steps ahead of us merely because one man said it POTENTIALLY could be IF something cobbled together by the same group of people who helped create this mess in the first place works?

Excuse me, but I for one would love to see the empirical evidence that these gamblers could present to prove their case. After all, we are not talking about men whose track record at predicting has been exactly accurate. Perhaps if the so-called stimulus package contained anything that had been proven in times past to actually induce economic activity of a lasting nature, I would be inclined to come around and embrace it and join the merry band of those who are happily gobbling up all the paper equities that they can and jettisoning gold but there is nothing in this bill except an increase in the size and scope of government and a lurch into socialistic policies, which have never worked at any time in history. That and a proliferation of debt which is looking more and more like something more closely related to a Biblical plague are what keep me fearful for the future of our nation and make me quite content to be holding the yellow metal as insurance against what these destroyers of wealth are doing.

The simple truth is what was stated by one of the few brave voices in the panel before which Ben Bernanke sat, Ron Paul, who informed the hapless Fed chairman that capital cannot be created out of thin air by means of an electronic printing press and that he was setting the stage for the ruin of the Dollar and runaway inflation. Not to worry however Congressman Paul, Mr. Bernanke assures us that this same Fed which has presided so brilliantly over our current economic debacle, stands ready and willing to deal with the inflation problem when it will arise. With that I can see the gears spinning and the thought processes taking over, “I must SELL GOLD; I MUST SELL GOLD; I MUST SELL GOLD.”

To sum up my lengthy rant, investors listened to the testimony of Bernanke and the speech of the Obama, and decided that at least the US was “doing something” about the crisis and would therefore be the first one to emerge from it. And based on that new thought process, they have decided that the US equity market is the place to be and that gold is once again moving back to its archaic, barbaric relic stage.  Since the stock market is supposedly forward looking, investors are looking forward to an improving economy and are buying in the hope of catching a major low in the equity markets while they sell gold hoping to catch a major top in the yellow metal. Risk in back in! To those of you who get your jollies by writing me and peevishly castigating me for being too long-winded, take that!

Now let’s get on to more serious stuff – gold has dropped down off the $1,000 region and moved into a region of strong chart support. It will need to find enough buying here to offset fresh short selling and long liquidation by the shorter-term oriented trading crowd. Failure near the  session’s low will allow gold to drop down to the next strong level of support which comes in near the $906 level followed by $900.  Below that is our old friend at $880 once again. Given the severity of the economic crisis, I would think that gold should hold here but trying to account for the thinking of the general investing community in this day and age is a hopeless waste of effort. They will do what they will do.  Everything depends on the affinity or lack thereof for “RISK”. I would prefer to see some consolidation activity and some base building to give players some time to get accustomed to the higher price but until then, volatility is the norm. Keep in mind that commercial end users and producers for that matter do not like volatility as it makes it difficult for them to assess risk exposure.

Once again, as it did yesterday, gold was following the movement in the equities in an inverse fashion. As stocks faded off their best levels, gold moved off its worst levels as did the miners which also moved higher as the broader stock market moved down off its highs. It does not take much observation to realize that what we are seeing is the market’s assessment of risk. When risk is in, equities get bought and gold gets sold. When risk is out, equities get sold and gold gets bought. Right now this is the prevailing theme in the mind of players. To a certain extent, gold and the bonds are moving somewhat in tandem as well. Gold moved off its lows and it did so did the bonds recovered  half their losses and then some as gold moved higher. That fits with the usual idea of safe haven buying occurring in both gold and the bonds.  I am not going to be so bold as to attempt to explain what is making players change sentiment as often as they change their socks but it is evident that a good many conflicting opinions are at work and confusion and uncertainty are driving market prices now.

One more comment about the bonds, after the $22 billion auction on the new 7 year notes, Treasuries moved back down. Not sure what to make of that just yet but apparently bond traders were not impressed with the auction results. The dip was short lived however as the fading equities brought out buying in the bonds that took them right back up again. Safe haven buying is definitely having a war with supply-fear selling.

I do like the fact that the mining shares did not utterly fall apart today even when gold was down quite sharply – perhaps that is a sign that any selling in the gold arena is being viewed as a buying opportunity rather than a reason to abandon ship. We’ll see…I wish I could say the same for silver. It was obliterated today which is very odd considering the fact that copper was up. If you are going to trash silver because of the “weak industrial demand” theory, then try explaining why the industrial metal copper, the supposed bellwether for economic activity was up.

On the daily price chart, gold violated the 20 day moving average but is tenuously clinging to support right at that level. Gold could drop all the way down to $890 – $880 and be sitting near the 50 day moving average and still maintain a technically bullish posture for the intermediate term. That is the region that held it back in January when it experienced a brief correction. There is already the usual chatter occurring of a long term double top occurring in gold near $1,000. Gold would have to close below $700 however to confirm such rashly premature conjecturing. It will now take a pit session close back above the $980 level to re-energize the bulls. That would set up the next run back to $1000.

On a personal note – sitting here writing day after day and attempting to explain what is becoming more and more inexplicable with the passing of each day is quite tedious and tends to takes it toll so I will beg your understanding if on certain days I limit my comments to a few chart observations unless something of definitive note occurs. The madness that passes for the price discovery mechanism today more often than not defies rational analysis. I think most of our readers understand by now that chasing price movement is now the norm for investing and that sort of activity is independent of reasoned analysis or logic. It is pure emotion and who can ever get a gauge on understanding the fickleness of such things. Keep your eye on the big picture at such times and try not to let the day to day gyrations rattle your composure. I have found that the best time for serious analysis of the markets and the macro-economic picture is after the markets are closed in the quiet of the evening when the noise from day trading scalpers and geeky hedge funds has quieted down. That is the only way to survive in these casinos. You cannot allow hedge fund idiocy to shake you from your firmed, settled, and reasoned convictions. Remember, most of them are losing money and many have folded and are gone.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini